Categories

Meta

Social

Category: Witness Preparation

“Just answer the question” is standard deposition advice. The idea—conveyed by countless lawyers to their clients—is that you should only answer the question asked, and nothing more. Don’t volunteer additional information.

If you’ve ever testified in a deposition, you probably heard some version of this advice from your lawyer. And you probably didn’t follow it.

“Just answer the question” may be the most ignored legal advice ever.

It’s not that people deliberately ignore advice from their lawyers. It’s just that the advice is so unnatural. Imagine a Monday morning conversation at the office like this:

No, people don’t talk like this. So expecting them to suddenly change the way they talk is asking a lot.

Now add to that strong emotions and a lot of money at stake. How many people will naturally just answer the question asked and nothing more?

I had one client who naturally just answered the question and stopped. He was an engineer.

And in a sense he was the exception that proves the rule. Social habits are not the only reason people find it difficult to just answer the question. It’s also because the vast majority of people are not analytical. Most people think intuitively, not analytically.

Try asking somebody “would you have voted for Brett Kavanaugh?” You’re not going to get a lot of “Yes, I would, because . . .” or “No, for the following three reasons. Number one . . .” Chances are you’re more likely to get some kind of emotional, gut-level reaction.

Yet despite how unnatural it is to just answer the question, some can be taught. The teachable can be trained to do a better job of just answering the question. If you work with them enough, by the time of the deposition they will do a pretty good job of just answering the question.

But some people seem unteachable. No matter how hard you try, they just can’t help themselves. There are many reasons for this.

Some people are angry about perceived injustice and want to vent their anger.

Some people have too much pride and want to show the opponent how smart they are.

Some people are nervous and talk more to try to compensate for their nervousness.

“Just answer the question” goes against the grain so much that I have sometimes wondered whether it would be better to reject the conventional wisdom and scrap the standard advice. Just let people go with the flow and answer au naturel.

But let’s not be too quick to embrace the natural approach. There are some good reasons for the conventional wisdom.

Why do lawyers tell clients to just answer the question in the first place? What exactly are we trying to avoid when we give clients this advice?

I think it comes down to trying to avoid four things. When you don’t just answer the question, you increase the likelihood that you will do one of the following:

4. Volunteer information that is helpful to your case, helping the other side prepare.

All of these things are bad, but some are worse than others. I have listed them from most harmful to least harmful.

The worst one is making a mistake that is helpful to the other side. This happens more often than you might think. One reason for this is that the lawyer asking the questions wants this to happen. And the more skilled that lawyer is, the more likely you are to make this kind of mistake.

Here we see the perils of volunteering too much. This witness makes two mistakes. First, she overstates the facts by saying she never emailed any customers. Second, she volunteers the fact that she called some customers.

Following the “just answer the question” advice can help people avoid mistakes like this.

But just answering the question isn’t always the best way to answer the question. Sometimes a simple yes or no leaves out your side of the story and makes the lawyer’s job too easy.

Let’s take this example:

Whoa! Did the witness just admit she concealed a critical fact from her employer? This is like Lester Holt getting Trump to say he fired Comey because of the Russia investigation, right? Game over.

Not necessarily. Under Texas law, an employee generally has a right to make plans to compete with her employer, and even to conceal those plans from the employer. See my popular post on Fiduciary Duty Lite.

But the simple “yes” still has a bad smell to it. Here are some alternatives:

Q: Did you conceal that fact from your employer?

A: They didn’t ask.

or

A: Yes, of course. Who wouldn’t?

or

A: Yes, because I wasn’t required to tell them I was looking.

I see some appeal to these answers, especially for courtroom testimony. They don’t dodge the question, but they give the witness a chance to push back. Sometimes it’s better to give an answer like this to prevent the questioning lawyer from getting on too much of a roll.

Of course, the lawyer asking the questions is likely to follow up with “is that a yes?” At that point, the witness should concede the answer. I call this the “you get to argue once” rule and wrote about it in Witness Preparation Lessons from the Waymo v. Uber Trial. If you argue too long, you’re just going to look defensive or evasive.

Plus, you don’t want to go too far in trying to match wits with the lawyer asking the questions. You may be really smart and good at your job, but I guarantee you, even a mediocre lawyer is better at duking it out in a deposition than a non-lawyer.

Wait a minute, I can hear a client saying. So first you tell me to follow the “just answer the question rule” sometimes, and then you give me another rule to follow. How am I supposed to keep all this straight, especially when I’m under pressure? It’s like telling a golfer to concentrate on five different things in the middle of swinging the club.

It reminds me of when Aristotle wrote about the best kind of government regime. He analogized to athletic training and said that the best training for the best body may be different than the best training for most bodies. (The Politics, Book 4, Chapter 1)

That’s true of deposition training too. You have to adapt the training to the person. If the witness really struggles to answer hard questions, it may be better to keep it simple and “just answer the question.”

But what if the witness is unskilled and unteachable? What do you do when “just answer the question” is just more than the witness can bear?

This is where the conventional “just answer the question” advice should yield to a more fundamental maxim: listen carefully to the question.

As we’ve seen, there is no single good way to answer tough questions. The best way to answer a question often requires a judgment call.

But “listen carefully to the question” is always good advice for everybody. If you listen carefully to the question—and think about what the lawyer is really asking—you are much less likely to make the worst kind of mistakes.

So, it turns out that the main problem with “just answer the question” is that it shifts the focus to the wrong thing. The focus should be on listening to the question, not deciding how to answer.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Let’s set aside the politics of the Brett Kavanaugh Supreme Court confirmation hearings for five minutes (as if that were possible). What can litigators learn about effective cross-examination from Senator Kamala Harris’s grilling of Judge Brett Kavanaugh about a possible discussion of the Mueller investigation with a law firm that represents Donald Trump?

The reviews of Harris’s performance were all over the map. Some gushed over the former prosecutor’s toughness and cross-examination prowess. Others, especially fellow litigators, scoffed like she was an amateur. (I imagine the latter is similar to the way jealous stand-up comedians review each other.)

And strangely enough, the varied reactions to the Senator’s technique tended to correlate with the political views of the reviewer.

But let’s put aside the fact that Harris is a liberal Democrat with presidential ambitions and Kavanaugh is a conservative Republican who could tilt the Supreme Court rightward for a generation. Let’s just look at it as a lawyer cross-examining a witness. What can we learn?

Recap

First let’s recap what happened. As you can view here, Harris asked Kavanaugh if he had ever discussed the Mueller investigation with anyone at the law firm Kasowitz Benson & Torres, the law firm founded by Donald Trump’s personal lawyer Marc Kasowitz.

Kavanaugh, thinking Harris must have some kind of information on such a discussion, stalled for time. “I would like to know the person you’re thinking of,” he said. Harris kept pressing, without revealing the name of the person she had in mind. Eventually, Senator Mike Lee jumped in to try to rescue Kavanaugh. When Harris resumed the questioning, Kavanaugh continued to avoid giving a direct answer.

This is a familiar scenario for litigators. It often happens in depositions. The lawyer asks a pointed question that is specific enough to imply the lawyer has the goods on the witness, but open-ended enough not to suggest the answer. This makes the witness squirm. “What does she have on me?” the witness thinks. Afraid of giving an answer that could easily be impeached, the witness bobs and weaves. If the lawyer keeps pressing, eventually the witness’s lawyer jumps in, even if that’s a violation of the rules.

So the Harris-Kavanaugh exchange provides a teaching moment. What do we think of Senator Harris’s cross-examination technique? And what can we learn from Judge Kavanaugh’s answers, or non-answers?

Grading Senator Harris

Let’s start with the Senator. So much depends on what she really has on Kavanaugh, if anything. If her question was based on pure speculation or rumor, then I would have to give her performance a C-. Because if she doesn’t really have any evidence of the discussion, then the whole episode will ultimately just hurt her credibility.

As I tweeted:

Yes, in the short term she created some doubt about Kavanaugh’s credibility—that’s why I wouldn’t give her an F—but if she can’t back up her implied accusation the court of public opinion will eventually ask “what was the point of all that?” You don’t want to get the jury excited about some juicy fact and then fail to deliver.

But let’s assume for the sake of argument that Senator Harris does have some specific, credible evidence that Kavanaugh had some substantive discussion of the Mueller investigation with a lawyer at Kasowitz. That would change things.

Then the evaluation would shift to the question of timing. When would be the best time for Sen. Harris to reveal the evidence she has?

Some observers skewered Harris for not immediately impeaching Kavanaugh with evidence. And perhaps they were right that the best time to bring it up was immediately.

But I think it’s wrong to assume that waiting was a mistake. Trial lawyers often have to make this kind of judgment call. The argument for bringing up the impeachment material immediately is that you want to score points while the issue is fresh on the minds of the audience. If you wait, the audience may forget the issue or worse, assume you never had anything on the witness in the first place.

But there are also good reasons to wait. The best one: You may be able to offer the impeachment evidence when it is too late for the witness or his lawyer to try to explain it away.

Let’s say in a civil lawsuit a witness testifies “no, I never emailed my customer list to anyone outside the company.” Suppose such an email comes into evidence later. Imagine the lawyer waits until closing argument to show that email to the jury. “Remember when Dawn Davis said she never emailed her customer list,” the lawyer says in closing, “I guess she conveniently forgot about this one.” What can Dawn say at that point?

So I have to give Sen. Harris an I for “Incomplete” on her strategy. Time will tell.

But of course it’s not just about strategy, it’s also about technique. For demeanor and tone, I give Harris an A. She was persistent without overdoing it. She didn’t let Kavanaugh or Lee get her off track. Her tone was dry, and her facial expressions said it all. “Be sure about your answer, sir,” she deadpanned with a skeptical look.

I liked her tone. But I’ll admit this is the most subjective part of the grade.

Grading Judge Kavanaugh

And of course, even the best cross-examination technique can be thwarted by a good solid answer. So how do we grade Judge Kavanaugh’s response? Again, so much depends on what the real answer is. As I tweeted that day:

Is there one I’ve missed? Let me know.

Kavanaugh started ok, saying “I’m not remembering,” but then he got more defensive, asking twice if Harris would tell him who she was thinking of, and then saying he was trying to think if he knows anyone at that firm. If he really didn’t remember, why not just stick with that and end the questioning there?

One possibility—consistent with possibility 3—is that Kavanaugh could not answer the question because Washington is crawling with lawyers, the Kasowitz firm itself has over 200 lawyers, and Kavanaugh cannot be expected to know the firm affiliation of every lawyer he talks to. This was essentially what Sen. Lee interrupted to suggest to the witness and the public.

In litigation, jumping in like this generally violates the rules, but I get it. Sometimes as the lawyer for the witness you just have to do it. (It’s only consistent with the rules if the questioning has crossed the line into harassment.) But if you’re the lawyer for the witness and you intervene to suggest the answer, the answer you suggest should at least be credible.

And the answer Sen. Lee suggested just wasn’t that persuasive. Are you telling me that a judge on the D.C. Circuit Court of Appeals—a court likely to hear some appeals arising from the Mueller investigation—has had so many conversations with people about the Mueller investigation that he can’t remember if one of those conversations was with a lawyer who works for a law firm that has represented Trump?

I don’t buy that. But in fairness to Kavanaugh, it’s certainly possible that he didn’t know for sure.

Without knowing which possibility is the truth, I’ll give Kavanaugh’s response a C. He doesn’t get an F, because at least he didn’t give a direct, dishonest answer. That would be the worst thing to do.

But his equivocating was not the best approach. It made him look like he had something to hide—even if he didn’t. And it instantly highlighted the issue as important. Instead of questioning the questioner—and inviting a debate—why not just give a simple answer?

That doesn’t mean you should trust your memory too much. There is no need to go out on a limb and say “I absolutely never spoke to anyone at that firm about Mueller a single time in my life.” But if the honest answer is “I don’t remember talking to someone at that firm about it,” then just say that. At that point you’ve taken the sizzle out of the question.

So it turns out the Harris-Kavanaugh episode doesn’t just give us a lesson on cross-examination. It teaches us something about witness preparation too: The simple truth will set you free.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

On February 5, 2018, the day after the real Super Bowl, the Super Bowl of trade secrets trials started in federal court in San Francisco. You might have heard of some of the parties. The defendant was Uber—perhaps the most controversial startup of the last decade. You may not have heard of the plaintiff, Waymo, but you probably know Waymo’s owner, a little company called Google.

The issue in a nutshell: did Google engineer Anthony Levandowski steal Google’s confidential self-driving car technology—they call it “LiDAR”—and take it to Uber?

This is the type of “departing employee” case I like to handle (usually on a slightly smaller scale), so it would have been fun to take the week off just to follow the trial, but alas, I had work to do for my own clients.

Fortunately, I was able to get the flavor of the trial by periodically checking my Twitter feed. Sarah Jeong, Senior Writer at The Verge, live-tweeted the trial and, after the case suddenly settled in the middle of trial, wrote this helpful wrap-up Who blinked first in Waymo v. Uber?

I bet the trial transcript—or even the tweet-stream—is a goldmine of lessons for lawyers who handle departing employee cases, and trial lawyers in general. But for now I’ll just share a little nugget about how to prepare witnesses to answer argumentative questions.

Laser is the Sauce

But first, in case you don’t know the back story, Fortune has a good timeline here. I’ll give you the simplified version:

The amount of money to be made from self-driving car technology is roughly equivalent to the GDP of France

Uber CEO Travis Kalanick decided it would be cool to back his bro Levandowski and acquire Otto

Waymo sued Otto and Uber for patent infringement and misappropriation of trade secrets

The case was unusual for several reasons: the net worth and public stature of the household-name parties, the high profile of the executives involved, the amount of alleged damages (close to $2 billion), the importance of the technology involved, and the Silicon Valley culture from which all of this emerged, to name a few.

But at its root, Waymo v. Uber was a fairly typical departing employee case: key employee does suspicious things, leaves first company, and goes to second company. First company sues second company for trade secrets misappropriation.

I haven’t studied the allegations in detail, but the picture that emerges from press coverage is bad “liability facts” for Uber—like some bad text messages and Levandowski downloading 14,000 proprietary Google documents shortly before leaving—but a weak damages case for Waymo. Apparently Waymo’s problem was that it couldn’t prove Uber actually received or did anything with the stolen files.

This is common. There are many trade secrets cases where the key employee is caught doing sneaky underhanded things he shouldn’t have done, but where it’s not clear whether those bad things actually caused damage to the employer.

My Witness Preparation Jam Sesh

That leads to my little lesson on witness preparation. Uber’s key trial theme was that it never received and used the alleged trade secrets. Specifically, Uber argued that the 14,000 files never got transferred to Uber. So, when Uber’s lawyer had Waymo’s expert witness on the stand, he zeroed in on that gap in Waymo’s evidence:

This is a good example of using cross-examination to make your argument. Uber’s lawyer is effectively standing before the jury and saying “ladies and gentlemen, there is no evidence the 14,000 files taken by Mr. Levandowski were ever transferred to Uber.” He’s just doing it in the form of a question to Waymo’s witness.

You can bet that Uber’s lawyer already knew the answer was no (probably from taking the witness’s deposition). So it was a good way to emphasize Uber’s key theme.

But of course, the question was a little misleading. This witness never examined Uber’s computers (assuming he was being truthful). That wasn’t his role. The fact that this witness didn’t find any evidence that the files got to Uber’s computers didn’t really mean a lot.

Still, I like the question. Part of the point of cross examination is to emphasize the points the witness has to concede that help your client’s case.

I also like the answer (at least on paper—it’s harder to say how it came off in person). Crain admitted the answer was no but got his little counter-jabs in at the same time. And that’s usually a good way to answer this kind of question, if you don’t take it too far.

Three Ways to Answer Argumentative Questions

There are basically three ways to answer this kind of argumentative question:

(1) The Just Answer the Question approach

(2) The Dog With a Bone approach

(3) The You Get to Argue Once approach

The first two approaches have some merit, but overall I like the third. Let’s break these down.

Just Answer the Question

The Just Answer the Question approach is just like it sounds. Let’s say the question is “did you take your employer’s customer list when you left?” If the answer is yes, then the witness just answers, “Yes.”

There are two main advantages to this approach. First, it is simple and easy to remember. As I explained in my post What the Ken Starr Interview Can Teach Lawyers About Witness Preparation—and Golf, a lot of witness preparation advice, even from professionals, is too complicated. It’s like telling a golfer to think about a dozen different things when swinging the club. Most witnesses are just not skilled enough to follow so many tips, especially under stress. So, there is some advantage to the simplicity of Just Answer the Question.

The second advantage of just answering the question is that the witness avoids looking evasive, arrogant, or overly defensive. That’s obvious. To avoid this risk, lawyers will sometimes coach the witness just to answer the question and not to throw in their counter-argument. “Save that point,” the lawyer will tell the witness, “and I’ll bring it up on re-direct.”

But there is a disadvantage to this approach. It makes it too easy for the questioning lawyer to get on a roll. Remember, what the cross-examining lawyer is really doing is making her argument in the form of questions to an adverse witness. If all the witness does is play along, he’s making it too easy. Maybe the witness will get a chance to bring up the point on re-direct, but the moment has passed. The damage has been done.

So there is something to be said for taking a more argumentative approach. When asked “did you take the customer list,” you can say “yes, but I never used it or gave it my new employer.”

Just don’t take this too far.

Dog With a Bone

For example, I worked on a case involving a real estate deal gone bad. Our client was seeking millions in lost profits damages resulting from another real estate developer effectively “stealing” the deal. The defense lawyer’s key theme was that his client couldn’t steal any deal because the deal hadn’t been finalized.

That led to the defense lawyer asking the plaintiff a series of questions that looked kind of like this:

You can see the problem here. While the witness does a good job of making his point, he takes it too far. This makes him look stubborn and defensive. The jury may start thinking, “this guy seems really difficult, maybe he never would have gotten approval from the City.”

That leads me to the You Get to Argue Once approach.

You Get to Argue Once

This is a middle ground. When the opposing lawyer asks an argumentative question that could give the jury a misleading impression, the witness makes the point he wants to make—but only once. If pressed after that, he just answers the question.

In the real estate case, it would go something like this in the courtroom:

Point made, but not overdone. And this is pretty similar to what Waymo’s witness did when asked if he found any evidence the 14,000 files were transferred to Uber’s computers.

Different Strokes for Different Folks

In general, I think the You Get to Argue Once approach is superior to the Just Answer the Question approach, and it is certainly better than the overly stubborn approach.

But of course, like everything in the law, it depends.

It depends in part on the personality of the witness. You tend to get two types: Nervous Ned and Alpha Dog.

Everybody gets a little nervous about testifying under oath, but Nervous Ned gets really nervous. This type just wants it all to be over as soon as possible. If just answering the question will end the ordeal faster, then this type is fine with just answering the question.

Alpha Dog is almost the opposite. This kind of witness relishes going toe-to-toe with the opposing lawyer. The witness can’t wait to unleash the counter-arguments when asked the tough questions. You know the type. Often this kind of witness is a CEO, executive, or self-made entrepreneur. And—let’s just be real about it—this type tends to be a certain gender.

If you’re the lawyer, you’ve got to coach Nervous Ned to stick up for himself a little more, and coach Alpha Dog to dial it down a notch or two. For the first type, the You Get to Argue Once approach means arguing a little more (unless that’s just too difficult, and then you may have to stick with baby steps and Just Answer the Question). For the second type, it means arguing less. In either case, you have to adjust for the personality.

And in both cases, the cardinal rules remain the same: listen carefully to the question, and always tell the truth.

Even if that means admitting you took the 14,000 files.

___________________________________________________________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. He has never used Uber, but he has Googled stuff before.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Scratch that. There is one thing better: when the person you’re suing changes his story after you confront him with bad emails he didn’t know you had.

Let’s consider a hypothetical.

Paula Payne Windows v. Dawn Davis

Dawn Davis was a salesperson for Paula Payne Windows, a wholesaler that supplies windows to builders in the construction industry. Paula Payne maintained a Master Customer List containing detailed information about all of its customers.

Dawn had a friend, Bob Coldstone, who did marketing for Real Cheap Windows, one of Paula Payne’s competitors. In June 2016, Bob emailed Dawn to set up a meeting with Natalie Vessel, the owner of Real Cheap. Bob said Natalie wanted to discuss Dawn joining Real Cheap.

The series of ensuing emails between Dawn and Natalie included these statements:

Dawn: “I can get you all the pricing information you want. I know my way around the network here like nobody else.”

Natalie: “Will you be able to bring all the information you need with you?”

Dawn: “The master customer list is password-protected, but guess who has the password?”

One month later, in July 2016, Paula Payne had a senior sales staff meeting to discuss moving more aggressively into a sales territory dominated by Real Cheap. Dawn Davis pushed back on the idea, saying that it would be difficult to compete with Real Cheap on prices, and that Paula Payne should focus on its existing customers. Heeding Dawn’s advice, the sales team dropped the idea.

In November 2016, Dawn announced to Paula Payne that she was leaving the company. A day before leaving, Dawn emailed Paula Payne’s master customer list to her personal gmail account and copied all of Paula Payne’s sales records for the past 90 days to a USB drive.

After Dawn left, most of her customers stopped buying windows from Paula Payne. The company then discovered Dawn was working for Real Cheap. Dawn was selling windows to her customers from Paula Payne and starting to solicit additional Paula Payne customers.

At trial, Paula Payne’s lawyer played the video of this portion of Dawn’s deposition. After finding that Dawn and Real Cheap misappropriated trade secrets, the jury found lost profits damages of $989,000, the amount calculated by Paula Payne’s expert.

Afterwards, one member of the jury commented to Dawn’s lawyer, “your client seemed pretty nice, but those emails just killed her.”

So where did Dawn Davis and her lawyer go wrong?

How Not to Handle Bad Emails

Paula Payne v. Dawn Davis is a case study in how not to handle bad emails in litigation. If you want to maximize your client’s exposure at trial, here’s what you should do.

1. Don’t find bad emails ahead of time and discuss them with your client

The first time Dawn’s lawyer focused on the emails marked as deposition exhibit 7 was in the deposition. By then, Dawn had already blown her credibility by making statements in conflict with the obvious import of the emails.

You need to know about the bad emails ahead of time. This point is obvious, but neglected more often than you might think.

Plus, even when lawyers are diligent, reviewing every email isn’t always feasible. Sometimes the volume of documents is just too large. Some clients can’t afford to pay for a team of BigLaw associates to review and code every document.

If finding all the bad emails ahead of time isn’t practical, then at least admonish your client to tell the truth and not to trust her memory too much. People have a great capacity to remember things happening in a way that supports their position. (This is true—I’m not just being sarcastic). When Dawn said Natalie never asked about prices, she may have thought that was true, but that’s the kind of statement a witness shouldn’t make unless she’s absolutely sure.

2. Conceal and delay as long as possible

If you do find the bad emails ahead of time, what do you do with them? Let’s assume that Dawn’s lawyer found the bad emails on Dawn’s hard drive but didn’t produce them in discovery. The problem was that Paula Payne’s forensic expert found them by restoring deleted emails on Paula Payne’s server.

This leads to the worst of both worlds: the bad emails eventually come out and they look even more incriminating because Dawn concealed them.

3. Pretend bad emails don’t mean what they obviously mean

It’s a deposition ritual to ask the witness to admit that a bad email means what it obviously implies, even if it doesn’t say it explicitly. Take Natalie’s statement, “I hope Paula Payne will drop this idea of going after our customers.” What should Dawn say when asked if Natalie was asking her to make sure Paula Payne dropped the idea?

It always depends on the circumstances, but if it’s obvious that Natalie was asking Dawn to stop Paula Payne from going after Real Cheap’s customers, then Dawn should freely admit that. Don’t pretend a bad email doesn’t mean something that everyone on the jury will know it means.

4. Dispute everything rather than focusing on your strong points

There is a certain type of litigator that follows an easily recognizable playbook: Contest every issue. Concede nothing. Attack on all fronts.

That approach can have short-term benefits, but it usually doesn’t end well. Plus, it tends to cost the client more money. It is usually better to concede the bad facts you ultimately can’t avoid, and to focus your efforts on the good facts that help you.

For example, Dawn Davis didn’t want to concede that she took Paula Payne’s master customer list to her new employer, Real Cheap. Perhaps a better approach would be for Dawn to admit she took the list, but to focus on the argument that the list is not a trade secret. If it’s true that anyone in the industry can readily construct the same list of builders who buy windows, then Dawn and her lawyer should focus on that fact.

The first four tips are great in theory, but they won’t help your client much if you don’t practice. Answering tough questions about bad emails is not easy. Rehearse how your client will answer hard questions about bad emails ahead of time.

And be careful responding to emails after 10 pm when you’ve had a long day at work. That’s how bad emails are born in the first place.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

This was part two of my four-part series commemorating the one-year anniversary of the Defend Trade Secrets Act.

Has the Defend Trade Secrets Act put a stop to corporate espionage by foreign governments and companies?

The NFL draft was last week, so it was a time for predictions. My Dallas Cowboys used their first two picks on guys named Taco and Cheeto. I predict TV commentators will have fun with that.

Speaking of predictions, back in May 2016 when the federal Defend Trade Secrets Act became law, I wrote this:

People think of a shadowy foreign company smuggling sophisticated plans for the next iPhone out of the country. But the typical trade secrets lawsuit is more mundane. Given the fact that a “customer list” can be a trade secret, an employer can sue for misappropriation of trade secrets just about every time a low-level sales employee leaves the company with the names and numbers of her customers on her smartphone. Are routine customer list cases now headed for federal court? We will see.

A customer list case is a “soft trade secrets” case. Soft trade secrets are the kind almost every company has or claims to have: customer lists, customer information, pricing, business strategies, etc.

“Hard” trade secrets are what people commonly think of as trade secrets: secret technology, secret sauce. This is the kind of thing most members of Congress probably had in mind when the Defend Trade Secrets Act passed with bipartisan support. It is probably also what the press had in mind when they hailed the DTSA as the dawn of a new era of protection of U.S. companies.

Indications from the first opinion applying the DTSA

Henry Schein, Inc. v. Cook was the first opinion I saw applying the Defend Trade Secrets Act. It augured that the typical DTSA case would be a soft trade secrets case. As I reported here, Henry Schein involved customer information in the sale of medical, dental and veterinary supplies and equipment.

Of course, that was just one case. But at that time I made this prediction:

A year from now when we look back at the cases filed in federal court under the Defend Trade Secrets Act, many more of them will be ordinary “customer list” cases like Henry Schein than complex schemes involving sophisticated secret technology. It will turn out that the first case applying the Defend Trade Secrets Act was the typical case.

So has the first year of litigation under the Defend Trade Secrets Act proven me right? Largely, yes. Judging by the opinions available on Westlaw (an admittedly unscientific sample), most Defend Trade Secrets Act lawsuits have been soft trade secrets cases like Henry Schein. I haven’t seen a single DTSA case that involved a foreign government or company stealing secret technology from a U.S. company.*

Another customer list case: First Western

Another good example is First Western Capital Management v. Malamed.[1] It was a classic customer list case.

The customer lists in trade secrets lawsuits usually fall into two categories: (1) a “big” list covering the company’s entire clientele; (2) a shorter list of the employee’s own customers.

The customer list in First Western was a big list: 130 pages, printed from the company’s “CRM” system, containing roughly 5,000 names, including 331 current company clients. The employee also printed out 22 pages of spreadsheets listing names of clients, the total market value of their holdings under management, the management fees being charged by the company, and “similarly sensitive information.”

In short, the customer list in First Western provided the identity of the customers, their specific preferences, and the prices charged to them. These are commonly the alleged trade secrets in a customer list case.

The issue in First Western was whether the company was entitled to a preliminary injunction barring the employee from using the alleged trade secrets to compete for the company’s clients. It’s a good DTSA case to study because it addresses so many interesting issues.

1. Witness credibility

First Western illustrates the paramount importance of witness credibility. The employee, Malamed, instructed his assistant by email to print three copies of the company’s “Client book” that was “on the disc.” Malamed admitted keeping a copy of the printout but said he never looked at it.

The district judge was not impressed with Malamed’s testimony at the temporary injunction hearing. Malamed said he had no idea how the last 22 pages of the printout were included, denied those pages contained highly sensitive client information, and claimed he was not sufficiently computer literate to use a disk or to “really know what a disk is.”

The judge wryly observed: “All of these examples, and others, lead this Court to conclude that Malamed has become willing to make statements or take positions with reference to what he believes will prevent liability in this case.”

Ouch. You could tell it was going to go downhill from there.

Lawyers, push hard on your clients when they plan to offer testimony that is going to raise judicial eyebrows. For example, if your client is going to deny that a customer list contains sensitive confidential information, test that assertion. If it holds up, and that’s really what the client thinks, then prepare the client to stick to his guns. But if not, persuade your client not to deny the obvious.

2. Employee intent

Malamed denied the client list contained trade secrets, claimed he could use public sources or his own memory to recreate a similar list, and did not deny his intent to go to work for a competing firm and service clients on the list. This was enough to convince the judge that Malamed would use the client information to compete with the company if not enjoined.

Again, as First Western illustrates, the lawyer representing the employee who took a customer list has a difficult choice. If you admit the customer list is a trade secret, you’ve helped the plaintiff prove half of its trade secret claim. But if your client denies the list is a trade secret, the judge may see that as evidence your client intends to use it.

3. Price undercutting

The judge in First Western saw a real threat of the employee using his knowledge of the company’s pricing to take its clients:

[W]ithout making any explicit comparison to FWCM, [Malamed] can offer management fees that are, say, a quarter of a percent lower than what he knows the individual was paying at FWCM, and thereby entice the client—who almost certainly would recognize that he or she was being offered a discount as compared to FWCM.

This is the usual “price undercutting” theory. I’ve made the same kind of argument for my clients. But this theory has some problems that the First Western opinion doesn’t address. I’ll have to save that for another blog post.

4. Is a customer list a “trade secret” in the first place?

A trade secret must have “independent economic value” to a competitor in the industry. The judge found that the company’s big customer list had value in two ways. First, the identity of the clients had value. The judge said a compilation of wealthy individuals willing to consider the financial management services the company provided was a valuable asset because it would at least save a competitor the time of identifying prospects by, for example, cold-calling individuals employed in high-paying professions.

Second, the judge found that information about the clients had value: their management fee percentages, preferences regarding risk, time horizon, communication style, etc. These were “informational assets” that a competitor would find “especially valuable.”

5. Does a trade secret have to be on paper, or can it be in your head?

What if the employee credibly testifies that he doesn’t have the customer list anymore and isn’t going to use it? Does that get the employee off the hook?

The judge in First Western didn’t think so. He found it sufficient that Malamed would remember the names of clients and the information about them. “Thus, the Court finds that Malamed, at a minimum, remembers trade secret information, even if he does not possess any trade secrets in physical or digital form.”

What does First Western tell us about the effect of the DTSA?

These were just some of the issues in First Western. None of these issues are unique to the Defend Trade Secrets Act. They are the same issues that would have come up under Colorado’s version of the Uniform Trade Secrets Act.

While the issues in First Western are interesting, the case is further confirmation that the main effect of the DTSA has been to shift some typical customer list cases from state court to federal court.

That is a significant change for lawyers who handle trade secret litigation, but it doesn’t show there was any compelling need to place a federal trade secrets statute on top of the trade secrets laws already found in 50 states.

The defensive line of the Dallas Cowboys generating a more disruptive pass rush next season? Now that’s a compelling need.

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. His client list is not 130 pages long.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Some Basic Issues in Texas Non-Compete Law Remain Unresolved

First of all, I don’t understand why the Texas non-compete statute says “geographical” when “geographic” would do. More about that later.

The typical Texas non-compete follows a predictable pattern, and there are thousands of them in circulation in Texas. As I explained here, as a Texas litigator I look for five key things to decide whether a typical Texas non-compete is enforceable.

But the answer is often cloudy. The recent case Orchestratehr, Inc. v. Trombetta shows that some basic questions about Texas non-compete law remain unanswered, and that minor factual distinctions can make all the difference to whether a Texas non-compete will be found enforceable. As we will see, this makes witness preparation especially critical in a Texas non-compete lawsuit.

Most Texas lawyers who deal with non-competes know the two basic requirements for enforceability: (1) the non-compete must be “ancillary to an otherwise enforceable agreement,” and (2) the non-compete must be reasonable in time period, geographic area, and scope. But lawyers who don’t have practical experience actually litigating these issues can get tripped up easily.

“Ancillary to an Otherwise Enforceable Agreement”

Whether the non-compete is “ancillary to an otherwise enforceable agreement” often comes down to whether the employee admits that (a) he needed confidential information to do his job, and (b) he received confidential information. Why? Here is how it usually plays out:

The employer’s agreement to provide confidential information to the employee can be an “otherwise enforceable agreement” supporting a non-compete, if the employer actually provides the confidential information.[1]

If the confidentiality agreement contains no express promise by the employer to provide confidential information (which, inexplicably, is sometimes the case), the question is whether there is an implied promise to provide confidential information.[2]

There is an implied promise if the nature of the work to be performed by the employee requires providing him confidential information.[3]

The confidentiality agreement, drafted by the employer, will typically define confidential information to include virtually every kind of information the employee receives in the course of employment.

The typical Texas non-compete will have a time period of one to three years. Despite the requirement of a reasonable geographic limitation, it will often have no express geographic limitation. Sometimes the non-compete will be limited to the employer’s existing customers, or the customers the employee personally dealt with.

It is safe to say this scenario—or some variation of it—has occurred in thousands of Texas lawsuits. So Texas courts by now must have a standard answer to whether the non-compete is enforceable in this scenario, right?

Well, not really. Even this cookie-cutter scenario raises at least two unresolved legal issues, and an important factual issue that varies from case to case.

Legal Issue #1: Does it Matter if the Information is Not Really Confidential?

The first unresolved legal issue is this: does it matter whether the information the employer provided the employee was actually confidential? The employer will argue that it is sufficient for the agreement to define the information as confidential and will cite this statement from the Texas Supreme Court:

Concerns that have driven disputes over whether a covenant is ancillary to an otherwise enforceable agreement—such as the amount of information an employee has received, its importance, its true degree of confidentiality, and the time period over which it is received—are better addressed in determining whether and to what extent a restraint on competition is justified.[4]

In other words, the degree of confidentiality of the information goes to the reasonableness requirement, not the “ancillary” requirement. Yet, despite this statement, it remains clear that a confidentiality agreement is only an “otherwise enforceable agreement” if the employer actually provides confidential information.

A non-compete is enforceable if it is stamped “Confidential” at the top. Just kidding. Sort of.

In the recent Orchestratehr case, the employee made the typical argument that the non-compete was not ancillary to an otherwise enforceable agreement because the employer did not give the employee any actual confidential information. Although the court implicitly accepted the employee’s legal premise, it rejected the employee’s argument based on two facts. First, the agreement had a typical clause that defined virtually everything as the employer’s confidential information.[5] Second, the employee admitted in his deposition that the information was confidential.[6]

Obviously, the second reason deserves more weight than the first. The fact that the agreement defines virtually all information as confidential should receive little, if any, weight. If employers could satisfy the “ancillary” requirement simply by reciting the right “magic words,” it would render the requirement meaningless.

The employee’s admissions, on the other hand, are hard to ignore. At the least, these admissions raised a fact issue for the jury on whether the employee actually received confidential information. This shows the importance of witness preparation in non-compete cases.

Factual Issue: Did the Employee Testify That He Received Confidential Information?

As Orchestratehr shows us, whether a non-compete meets the “ancillary” requirement can often turn on whether the employee admits that the information he received was confidential. This makes witness preparation critical.

If you represent an employee who signed a typical non-compete tied to a confidentiality agreement, you need to thoroughly debrief the employee early in the case about the kind of information needed to do the job and the type of information the employer actually provided. Go into detail, and review the documents (if available). It’s important to do this early so you can answer two crucial questions.

First, if the non-compete does not have an express agreement to provide confidential information to the employee, did the nature of the work required confidential information? If the answer is no, you need to prepare your client to say so and to explain why.

Second, can the employee reasonably contend that the information he received was not really confidential? If the answer is no, then don’t waste your time and effort trying to argue the employer failed to provide confidential information. Ultimately, a half-hearted or frivolous argument that the information was not confidential will not help your client.

But the answer is often yes. Customer lists, customer information, and prices are the information most commonly claimed to be confidential. I sometimes call this kind of information “soft” trade secrets. Employers always think this information is extremely valuable and confidential. In reality, it is often readily ascertainable by competitors. The real value is usually in the personal relationships the employee has with his customers.

Don’t get me wrong. There are legitimate cases where these “soft” trade secrets are truly confidential. (The cases where I represent the employer typically fall into this category.) But those cases are rare.

Orchestratehr shows the importance of witness preparation in non-compete litigation

There is almost always at least a reasonable argument that the price and customer information the employee received is not really confidential. If you represent the employee, push hard to test whether that is really true, and if it is true, then prepare your client to make that argument and to stick to his guns. It does no good to take the position that the information was not confidential if your client is going to fold under pressure in his deposition and concede that “yeah, I guess that was sort of confidential.” That’s the kind of testimony likely to be cited in a later opinion—like the one in Orchestratehr—holding that the non-compete is enforceable.

Conversely, if you represent the employer who is trying to enforce the non-compete, you need a plan for getting the employee to admit that the information he received was confidential. I would give you some tips on this, but I can’t give away all my secrets.

Legal Issue #2: Do You Really Have to Have a Geographic Limitation?

Like a lot of typical non-competes, the non-compete in Orchestratehr had no express geographic limitation. As the federal district court correctly noted, some Texas appellate courts have held that limiting a non-compete to certain customers can substitute for a geographic limitation. The Orchestratehr court held that, despite the absence of a geographic limitation, limiting the non-compete to existing customers of the company was sufficient.[7]

This is certainly a plausible position, but it is troubling. I am not aware of the Texas Supreme Court ever adopting this position, and the reasonable geographic limitation is an express requirement in the non-compete statute. It would be a little odd for our current Texas Supreme Court, which seems fond of “strict” textual construction of statutes, to interpret the plain language “geographical area” as meaning “geographical area or some reasonable substitute for it.”

Until the Texas Supreme Court definitively resolves the issue, lawyers for Texas employees should continue to argue that, by statute, a Texas non-compete must have an express geographic limitation.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[5] The agreement defined Confidential Information as “any information of any kind, nature, or description concerning any matters affecting or relating to Employee’s services for COMPANY, the business or operations of COMPANY, and/or the products, plans, pricing models, customer lists, marketing plans, processes, or other data of COMPANY.”

A Recent Case Shows What it Takes for a Texas Trade Secrets Injunction to Hold Up on Appeal

I previously wrote here about how not to enforce an injunction in a non-compete lawsuit. But when an employee takes your client’s confidential information or trade secrets, what evidence do you need to get an injunction in the first place?

Most lawyers can recite the buzzwords courts have used thousands of times: “imminent harm,” “irreparable injury,” “no adequate remedy at law.” But let’s face it. Courts have a hard time coherently explaining these concepts. The recent Texas case Daugherty v. Highland Capital Management is no exception.[1]

Imminent harm? Yes. Irreparable injury? Probably not.

Lawyers who handle these cases should understand that imminent harm and irreparable injury mean two different things:

“Imminent harm” means that harm is about to happen if the court doesn’t stop it. This has nothing to do with whether the harm is “irreparable.”

“Irreparable injury” means that awarding damages would be an inadequate remedy for the harm. This has nothing to do with whether the harm is about to happen or not.

Unfortunately, courts often confuse these two requirements. For example, a court will cite evidence that a competitor is in a position to use a company’s trade secrets as establishing “irreparable injury,” when that fact actually goes to the issue of “imminent harm.”[2]

Another recurring problem is that when courts cite evidence of “irreparable injury” in a trade secrets case, they often cite evidence that is either tautological or generic. In other words, they tend to cite evidence that is either (a) true by definition or (b) recited in virtually every trade secrets case. This renders the analysis less than satisfying.

The jury verdict, on the other hand, was a little unusual. The jury found that Employee breached the confidentiality agreement, Employer’s damages were zero dollars, and Employer’s reasonable attorneys’ fees were $2.8 million. The judge awarded Employer the attorneys’ fees plus an injunction against retaining, using, or disclosing Employer’s confidential information.

This raises important questions. First, where can I find one of these clients who will pay $2.8 million to try a confidentiality agreement case? Second, what does Highland Capital teach us about what evidence is necessary for a trade secrets injunction to hold up on appeal?

Evidence of Imminent Harm?

Here are six things the Highland Capital court cited as evidence of imminent harm, followed by my questions:

1. The court said there was “evidence that [Employee] took, kept, and used confidential information.”

This is evidence that the employee breached his confidentiality agreement, but is it evidence of imminent harm?

2. The court cited “demands and protracted litigation.”

Saying the litigation was “protracted” reminds me of what Nathan Arizona said when the police asked if he had any disgruntled employees. “Hell, they’re all disgruntled . . .”

3. Employer’s expert testified: “this information goes to the core of what [Employer] does as a business and what [Employer] is in terms of its value.”

This is fairly generic. Believe me, every company thinks the information the employee took “goes to the core” of the company’s value.

4. Employer’s expert: the information’s “existence away from [Employer] harms [Employer] because there’s always the possibility that it can get into general distribution . . . or to a competitor.”

This seems tautological. By definition, doesn’t the fact that someone else has the confidential information create a “possibility” that it could become public or known by a competitor?

Does the “possibility” of harm establish irreparable injury?

5. Employer’s expert: the harm “may not be immediate, but the harm may occur over a long period of time.”

Doesn’t the fact that the harm may occur over a long period of time suggest it is not imminent?

6. Employer’s expert testified “I cannot quantify the total harm,” and “it may be that I can’t measure the specific relationship of these documents to that harm. . . you can’t measure things that you don’t know have occurred.” Asked if he performed “any sort of statistical analysis to try to put a number to this harm,” the expert said, “We did not and could not.”

Do these statements go to whether the harm is imminent, or whether the harm is irreparable? It seems like the court put this evidence in the wrong section of the opinion.

Evidence of Irreparable Injury?

As for irreparable injury, the Highland Capital court cited these key points from the testimony of Employer’s co-founder:

In other words, Defendant misappropriated confidential information. But does that make the injury irreparable?

2. There was “[a] particular document [Employee] failed to return in which one of [Employer]’s investors was identified as well as names of our other clients and the investment objectives which are confidential.”

Again, this is evidence of misappropriation of confidential information, but how is it evidence of irreparable injury?

The harm from losing confidential information can be difficult to quantify

3. “Some of the people in the marketplace can replicate our firm strategies and our investment objectives and form competing funds with these materials like marketing materials.”

This could be evidence of imminent harm, but how does it show that the harm could not be compensated by damages?

4. “If our investors see that we don’t have enough safeguards over our confidential information they would refuse to invest with us, we would be violating our agreements with them, we would be violating the law.”

Again, this is evidence of the possibility of injury, but how does it establish irreparable injury?

5. “Putting a dollar value is almost impossible. But it’s very valuable to us. It’s very, very important.”

Now we’re getting somewhere. This goes to the issue of irreparable injury. But this testimony seems generic. Very, very generic.

Based on this testimony, the court said there was “evidence of harm that could not be quantified,” and therefore, evidence of irreparable injury.

What Did We Learn Today?

So what do you think? Does the analysis of imminent harm and irreparable injury in Highland Capital support my point that courts often get these two requirements confused? Does it show that courts often rely on tautological or generic statements to uphold an injunction?

Understand what you need to prove to stop the use of your client’s confidential information

The more practical lesson for litigators is this: If you are trying to get an injunction for your client, offer evidence showing that the defendant is going to use or disclose the confidential information soon if an injunction is not granted (imminent harm), and that damages would be an inadequate remedy because the harm is inherently difficult to quantify (irreparable injury). Even if courts get confused, don’t mix up these concepts in your own mind.

Irreparable injury can be tricky. You need to show that quantifying the damage is inherently difficult, but without conceding that the damage is speculative. This balancing act is especially difficult when, as in Highland Capital, you are also trying to persuade the jury to award lost profits or some other form of damages.

Don’t forget to prepare your witnesses to say the right “magic words,” like “putting a dollar value on this is almost impossible” (if that’s true). But take it a step further and have your witnesses explain why quantifying the damage is difficult. Because it’s not enough to have some generic testimony to uphold the injunction on appeal. It’s also important to persuade the trial court judge to grant the injunction in the first place.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

[2] For example, in Tranter, Inc. v. Liss, No. 02-13-00167-CV, 2014 WL 1257278 (Tex. App.—Fort Worth March 27, 2014, no pet.), the court said that “[a] highly trained employee’s continued breach of a noncompete agreement creates a rebuttable presumption that the employer is suffering an irreparable injury.” While the fact that an employee is competing in violation of his non-compete suggests imminent harm, it does not show that the harm is irreparable.